Lammy unveils £10bn bonds pledge to deliver 30,000 new social homes

Members of the public would be able to invest in a major homes building drive under ambitious plans drawn-up by mayoral hopeful David Lammy.

The Tottenham MP says he would raise £10bn by issuing bonds to fund the construction of 30,000 new social homes which would be delivered in partnership with local councils and housing associations.

Mr Lammy says 80 per cent of the bonds would be marketed to institutional investors, with the remaining 20 per cent reserved for “ordinary Londoners” who would have an unprecedented opportunity to invest in the city’s growth.

Half the money raised would be used to finance the 30,000 social homes pledged today, with Mr Lammy’s campaign saying they’ll announce how the remaining £5bn wold be spent “in the coming days”.

Today’s announcement builds on current Mayor Boris Johnson’s use of bonds to finance the construction of Crossrail and the Northern Line extension to Nine Elms and Battersea.

In 2011 Mr Johnson hailed the advent of City Hall issued bonds as “an innovative solution to bear down on borrowing costs” and suggested they could become a “model” for future infrastructure projects.

Lammy says his plans would harness the expertise and success of the capital’s financial centre to help deliver real change for those who would otherwise wait “years” on a council waiting list before being offered a home.

According to his campaign, the would-be mayor has already held talks with key City figures who have predicted “high demand” for the bonds which would be issued through a new ‘Homes for London’ agency that would work with partners to deliver the new properties.

Lammy said his plans go further than any proposal put forward by his rivals for the Labour nomination and marked a move away from the “old politics” of political leaders failing to take action “in the mistaken belief that private developers will build the number and type of homes we need.”

Although the private sector “has a role to play,” Lammy says it will never build homes “in the numbers we now need” meaning the mayor “must play a much bigger role in making this happen.”

“Other candidates will talk about social homes, but my focus is building them. That is the bold and hands-on leadership our city needs. I want to see a new London where every single Londoner has access to a decent and genuinely affordable home.

“But I won’t rely on others to deliver that – I’ll take big steps towards doing it myself, and today I’m announcing a substantive policy that will help us get there.”

Lammy said Labour members, who will select the party’s mayoral candidate this summer, now had “a clear choice” between candidates “whose housing policies amount to more of the same tinkering around the edges that we’ve had for years, or someone who has a clear plan for housing in London and who is willing to be bold, innovative and radical to build the homes we need.”

Commenting on Mr Lammy’s plans, Henry Gregg, assistant director of communications and campaigns at the National Housing Federation, said: “Housing associations can deliver the affordable, quality homes that London needs and we would welcome new forms of investment to help make that happen.”

This article was amended on June 5th to clarify that half the money raised would be spent on delivering the 30,000 social homes.

Comments

New ideas are always welcome, but this one, without more information being available, is in danger of falling into the category of being financially illiterate.

Questions that matter are:-(1) who are the intended investors in the bonds? (2) what is going to be the basis for the returns to the investors (purely nominal?/linked to an inflation measure, if so, which?/linked to the price of houses?)? (3) what will be the security underlying the bonds? (4) what happens if rent controls or caps are introduced? (5) what happens if greater security of tenure is allowed to tenants?

It has to be noted that it is already thought that chaos will ensue if right to buy is extended to housing association tenants. This may inhibit investment in the bonds.